Mekong Delta - Obstacles in production: Creating linkage, only to find that it’s nowhere easy

It's still hard when done properly

In the early years of starting the production linkage movement, Loc Troi Group (formerly An Giang Plant Protection Joint Stock Company) pioneered not only participating in the movement of building “big paddy” in An Giang but also plan to expand the material area to many other provinces in the Mekong Delta.

In 2011 Loc Troi Group initiated a plan to establish the “big paddy” and form a rice material area according to the production value chain. A cluster of rice drying, milling and processing factories was built in each large field with a scale of 170.000 ha. Having confidence in their production and agro-material trading strengths, the enterprise ensured the supply of fertilizers and pesticides in the associated fields and purchased rice at the end of the crop.

In the first six years, the “big paddy” initiative had proven itself in terms of social benefits. Its farmers were put in high regard and gained the trust of customers. Ngoc Troi rice products were widely chosen by domestic consumers, attracting the attention of domestic and foreign partners. The quality of rice produced in the “big paddy” always had a higher selling price than in the paddies outside.

However, Loc Troi’s production link chain gradually revealed to pose more problems than expected. There were years when the situation of the rice export market was very difficult, affecting the development progress of “big paddy” and not reaching the initial plan. Loc Troi's rice purchasing method five years ago was considered appropriate, but as said by an official in charge of the group's food industry later on, not making adjustments in time meant failure. The enterprise’s example proved that the development of “big paddy” was nowhere easy.

According to An Giang Department of Agriculture and Rural Development, in the 2011 - 2015 period, An Giang established “big paddy” with a total area of over 48,700 ha. There were 20/28 enterprises implementing contracts with 14 agricultural cooperatives and 21 cooperative groups. By 2016, the “big paddy” area in An Giang decreased to 36,220 ha and only 18 enterprises participated.

Although the movement to build “big paddy” was strongly encouraged, farmers and businesses agreed to participate in production linkages, and local authorities actively supported it, in reality, there were many difficulties. The common reason was only that the rice market price constantly fluctuated. Businesses and farmers did not negotiate to find a common voice, and the contract signed between the two parties is not clear and loose, affecting long-term business.

Finding a new linking method

Mr. Tran Thai Nghiem, Deputy Director of Can Tho Department of Agriculture and Rural Development, said that starting from the 2011 summer-autumn crop, Can Tho implemented production linkages, forming a “big paddy” of 400 ha. Twelve rice crops later Can Tho formed 75 “big paddies” with a total area exceeding 17,600 ha.

Over the years, “big paddy” in Can Tho maintained each crop under 20,000 ha. However, in recent years, Can Tho Department of Agriculture and Rural Development has received news of an improvement in the rice production and consumption linkage. Now the province’s “big paddy” is 34,000 ha, and the transformation of participants in the movement is changing. Although there are few large rice trading enterprises participating in production linkages, the number of small and medium-sized enterprises (SMEs) and satellite enterprises (private enterprises and rice mill owners) is increasing.

SMEs come to place orders through cooperatives and cooperative groups, asking farmers to produce and offering to consume end-of-season rice. Each enterprise contracts approximately 500 ha to over 1,000 ha per crop. The production linking method has become simpler.

Contracts through "papers" are no longer too important and common. Parties do not "heavily put on" the signing, but reach an agreement on production conditions while putting faith in prestige: When ordering rice varieties before the season, enterprises require the cooperative to commit to farming techniques. Member farmers must comply with advanced rice production standards and use pesticides of the agriculture industry. At the end of the crop, ordered businesses would send employees to the fields to check before purchasing.

With this change, farmers in cooperatives can be proactive and free in how they themselves choose agricultural inputs. Regarding the terms of sale and purchase, all parties in the production linkage all agree to follow the market price. This should reduce the situation of "breaking the contract" from the beginning of the crop.